New York AG Accuses ExxonMobil of Climate Change Accounting 'Sham'

All eyes will be on James Comey’s testimony in front of Congress this week, yet the Trump Administration has additional headaches that could push the White House staff to gulp down more aspirin and seek more legal counsel. One other pain point is that new court filings allege Secretary of State Rex Tillerson may have links to a potential climate change accounting scandal that festered while he was CEO of ExxonMobil.

According to court documents filed by New York Attorney General Eric Schneiderman, ExxonMobil may have made “false and misleading statements” about potential risks to shareholders by future climate change regulations. Schneiderman and his staff have issued subpoenas for documents and other information that covered ExxonMobil’s risk management practices over the past several years.

The problem, according to Schneiderman, is that in past proxy statements the company distributed to its shareholders, ExxonMobil often cited potential carbon prices has high as $80 a ton in order to quantify the cost of future government regulations when discussing costs related to the company’s projects in region such as Alberta’s tar sands. But Schneiderman and his staff have accused the company of using a far lower figure for greenhouse gas (GHG) costs internally.

“Exxon’s use of the lower GHG taxes instead of its publicly-stated proxy costs is particularly telling,” says the memorandum about the company’s discussion of its Alberta investments, “because Exxon’s own documents suggest that if Exxon had applied the proxy cost it promised to shareholders, at least one substantial oil sands project may have projected a financial loss, rather than a profit, over the course of the project’s original timeline.”

Furthermore, Schneiderman alleges that this was not the work of a few rogue employees in the company’s finance or investor relations departments. Then-CEO Tillerson was “specifically informed of, and approved of, this inconsistency,” before the company supposedly ceased using the double-accounting trick in 2014.

In representing this data to shareholders, complains Schneiderman, ExxonMobil’s disclosures of climate change-related costs and risks “may be a sham.”

The latest request for documents filed in court by Schneiderman arrives as the Securities and Exchange Commission (SEC) has conducted investigations about the companies’ valuations of some of its oil and gas reserves worldwide. The SEC’s investigations have been unfolding as states’ attorneys general, including those of Massachusetts and California, launched their own legal inquiries over accusations that ExxonMobil suppressed its own climate change data years ago.

Do not expect this saga to end anytime soon. As David Hasemyer explains with great detail on Inside Climate News, ExxonMobil is determined to fight this litigation, and has the deep pockets to fund its quest to fight any and all climate policy seen as a threat to its business interests.

But while ExxonMobil has the heft to fund and win legal battles, it may be losing the optics war while dragging the White House down with it. Earlier this year, one of the company's key corporate responsibility advisors resigned, citing the “targeted attacks” on NGOs. While the company and Tillerson have claimed to support the Paris Agreement and some form of a carbon tax, critics say what is said publicly as opposed to what actually occurs on the ground demonstrates that ExxonMobil is doing little more than paying lip service to climate action. Furthermore, the specter of its former CEO and now U.S. Secretary of State embroiled in litigation is not a distraction the White House needs in the wake of last week's withdrawal from the global climate accords.

Shareholders have apparently had enough, including scions of the Rockefeller family, the founders of Standard Oil, which eventually morphed into many energy firms including ExxonMobil. Most family members have sold off their ExxonMobil shares. And Last week, owners of company stock were asked approve a shareholder resolution asking the company to be more transparent about how climate change will impose risks on the company – and in an upset, it passed overwhelmingly.

Leon Kaye, Executive Editor, has written for Triple Pundit since 2010. He is also the Director of Social Media and Engagement for 3BL Media, and the Editor in Chief of CR Magazine. His previous work can be found at The Guardian, Sustainable Brands and CleanTechnica. Kaye is based in Fresno, CA, from where he happily explores California’s stellar Central Coast and the national parks in the Sierra Nevadas.